The smartphone industry is in a tailspin, with unit sales falling for two straight years, but Apple has escaped the downturn because wealthy customers continue buying pricey iPhones.
The world’s most valuable tech company, which relies on the iPhone for half its sales, reported on Thursday that revenue fell 1 percent, to $81.8 billion during the three months that ended in June, the company’s thirdquarterly sales decline of its current fiscal year. Profits increased 2 percent, to $19.88 billion.
Apple’s results were buoyed by the resilience of its iPhone business. At a time when smartphone rivals Samsung and Vivo are experiencing a sharp decline in sales of low-priced phones, Apple has managed to increase its market share and expand its sales in emerging markets such as India and Latin America. It made $39.67 billion from iPhone sales, down 2 percent from a year ago.
The company narrowly exceeded Wall Street expectations for sales and profit. Shares declined 0.7 percent in after-hours trading.
The results were the latest indication that tech’s biggest companies have found their footing after last year’s downturn. Last week, Facebook’s parent company, Meta, and Google’s parent company, Alphabet, reported double-digit growth in profits driven by a rebound in digital ad sales. Microsoft posted a record quarterly profit behind a surge in cloud-computing sales.
The tech industry limped through much of 2022 because of weak digital ad, e-commerce and computer sales. The downturn led Meta, Alphabet, Microsoft and Amazon to lay off thousands of workers and spurred companies across Silicon Valley to cut back on perks such as free laundry services for employees.
Though Apple avoided layoffs, it is now dealing with how much the pandemic turbocharged its business. Sales of iPads and Macs exploded as people began working from home, but new purchases of tablets and computers have sputtered over the past year. During the three months ending in June, the company said iPad sales decreased 20 percent, to $5.79 billion, and Mac sales declined 7 percent, to $6.84 billion.
The company was able to weather declines with continued growth in App Store and watch sales. The company’s services business, which includes subscriptions to Apple Music, App Store sales and Apple Pay, posted $21.21 billion in sales, an 8 percent increase from last year. The wearables business, which includes Apple Watch and AirPods, reported that sales rose 2 percent, to $8.28 billion.
Apple will continue to lean on its existing businesses for the bulk of sales in the coming years. In June, the company unveiled its first major new product since 2014: high-tech goggles that blend the real world with virtual reality. But the $3,500 device, called the Vision Pro, won’t go on sale for another year. It is projected to sell fewer than a half million units, according to analysts, a fraction of the roughly 200 million iPhones the company sells annually.
In the absence of a major new revenue stream, the company has focused on boosting sales in developing markets. It opened its first stores in India in April and welcomed crowds of eager shoppers. Its sales there have doubled in recent quarters from last year, as more and more Indians buy higher-priced phones. The rise in sales puts the company in position to capitalize on a market that is predicted to have a billion smartphone users by 2026.
“There are a lot of people coming into the middle class,” said Tim Cook, Apple’s chief executive, during a call with analysts in May. “I really feel that India is at a tipping point.”
Apple is expected to unveil a new iPhone in September, as well as updated models of the Apple Watch. Wall Street and industry analysts who track the company’s supply chain are not expecting any significant design changes or new features. Richard Kramer, partner at Arete Research, a stock research firm, said that the 16-year-old device has entered a phase where improvements to the newest models are becoming “incrementally incremental.”